A New Look Inside International Wholesale Services

Many retail service providers—mobile operators, MVNOs, and cable broadband providers—rely heavily on wholesale carriers to transport and terminate their customers’ international calls.

With the recent update to the TeleGeography Report and Database, we know that wholesale carriers terminated approximately 363 billion minutes of traffic in 2016, down four percent from 2015.

While wholesale traffic declined in 2016, over the previous decade, wholesale traffic grew at a compounded annual rate of 10 percent, while overall traffic grew 7 percent annually. Consequently, the ratio of international traffic terminated by wholesale carriers increased from 52 percent in 2005 to approximately 69 percent in 2015.

Wholesale traffic and revenues are not distributed evenly around the world; certain regions account for disproportionate shares of traffic and revenues.

Wholesale traffic and revenues are not distributed evenly around the world; certain regions account for disproportionate shares of traffic and revenues. For example, wholesale carriers terminated over 80 percent of traffic to Sub-Saharan Africa, Central Asia, and South America. Conversely, wholesale carriers terminated just 44 percent of traffic to fixed lines in western Europe.

Overlaying international wholesale revenues by route over the “long tail” of retail traffic by route reveals destinations for which wholesale revenues are unusually high. If wholesale revenues by route correlated with traffic by route, then the wholesale traffic line would slide smoothly downward. Yet instead it is spiky. This effect occurs when calls to a particular destination are served mainly by wholesale carriers, or when wholesale rates to a destination are unusually high, or a combination of both.

For example, the Russia to Ukraine route accounts for 1.8 percent of revenues, but only 1 percent of volume. Thanks to low termination prices in Mexico, the U.S.-to-Mexico route serves as a converse example: that massive route represents 7 percent of all international traffic in the world, but only 0.5 percent of wholesale carrier revenues.

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Paul Brodsky

Paul Brodsky is a Senior Analyst at TeleGeography. He is part of the wholesale network, internet, and voice research team. His regional expertise includes Europe, Africa, and the Middle East.